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Innovate for insurance revenues and profitable growth



The insurance industry has proven its resilience . through disruptions of COVID-19 and massive claims from storms and other catastrophic events values ​​have gradually improved [1

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Despite uncertain and extreme conditions, forecasts for increased global GDP now show greater demand for insurance cover. In our latest report, Insurance Revenue Landscape 2025: Innovate for Resilience, my colleague Ravi Malhotra describes what we see on the horizon.

Our revenue model took into account: changing customer requirements, how insurers react from the supply side, effects over 70 trends and the dynamics of global revenue pools. Based on these analyzes, we expect revenues from the insurance industry to grow by $ 1.4 trillion to $ 7.5 trillion over the next five years.

Click / press to view a larger image. premier. Although managed healthcare plans have traditionally not been counted as part of the insurance sector, they are essential in this context. Global demand for health services, including digital health products and services, is blurring traditional industry boundaries.

While we expect a total six-year compound annual growth rate of 3.5 percent, but we do not expect this growth to be evenly distributed. . Emerging markets in Asia and the Pacific drive up the global average. This is most notable in China's large GDP growth.

There is no "rising tide"

Keeping the course is really not an option this time. Nearly half a trillion dollars ($ 480 billion, about 7 percent) of the $ 7.5 trillion in gross premium expected in five years will be severely affected by innovation. We expect $ 200 billion from new risks, $ 140 billion in existing revenue from product innovation and $ 140 billion in offshore investment channels.

With innovation-driven revenue replacing traditional revenue in many product lines, insurers must innovate for both retention and growth. In the meantime, they will need to make scenario-based plans that help build resilience in their strategies.

Profitability is increasingly limited

Even the most innovative insurers will realize the harsh realities of the industry's profitability. Improved pricing in a hardening market is counteracted by increased exposures from new risks and with increasing competition from new market participants. Investment income also remains stubbornly low with non-life insurance and life insurance providers who see book returns averaging 3 percent and 4 percent, respectively.

As a result, we expect the combined conditions to fluctuate around 100 percent and leave insurance profitability flat. Average expenditure ratios are also likely to remain in the high 20s, as average loss-to-earnings ratios rise marginally from the current level in the low 70s (source: Real Estate Accident Forecast and Analysis – 20Q4, Conning).

Concerns about increasing catastrophic risks and increased systemic risks, such as climate change, cyber threats and business disruptions, require more sophisticated risk models and regulation of loss aggregation. The estimated modest single-digit surplus growth must be supplemented by increases in capital reserves (or a reduction in exposure), which further reduces the return on equity.